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“The bare right to sue” is not one of the exclusive rights articulated in Section 106 of the Copyright Act, and thus a transfer agreement that grants only that right to a licensee does not give the licensee standing to sue for copyright infringement, the U.S. Court of Appeals for the Ninth Circuit held May 9 (Righthaven L.L.C. v. Hoehn, 9th Cir., No. 11-16751, 5/9/13).

Finding that Righthaven L.L.C. lacked standing, the appeals court affirmed district court dismissals of two copyright infringement lawsuits that were brought by a Las Vegas law firm that in 2010 began trying to enforce its newspaper clients' copyrights by first acquiring the copyright in an article and then filing a copyright infringement claim against others believed to have copied and re-published the article elsewhere online.

After affirming the dismissal of the cases on standing grounds, the appeals court said that it need not reach any alternative rulings made by the district courts. It thus declined to consider, and consequently vacated, one of the lower opinions that had deemed the re-posting of an entire newspaper article fair use.

Righthaven Partners With Newspapers, Sues

In 2010, Stephens Media, the publisher of the Las Vegas Review Journal, entered into a Strategic Alliance Agreement with Righthaven L.L.C. The SAA purported to create a partnership between the two companies whereby all necessary rights to articles that were subject to infringement would be transferred to Righthaven for the limited purpose of bringing infringement actions. Pursuant to that agreement, and to a similar arrangement with Media News Group, publisher of the Denver Post, Righthaven brought 276 copyright infringement suits against websites, bloggers, and in Hoehn, a commenter to a website, between March 2010 and May 2011.

Righthaven's tactics of filing scores of lawsuits seeking maximum statutory penalties for willful infringement--under 17 U.S.C. §505--without first sending a warning or takedown notice, sparked controversy (80 PTCJ 811, 10/22/10). Moreover, Righthaven also demanded that the defendants turn their domain names over to Righthaven, and thus many defendants settled out of court for undisclosed sums rather than going to trial and risking a statutory damages award of up to $150,000, and a loss of their domain name. In an early ruling in Righthaven L.L.C. v. DiBiase, the other case subject to the Ninth Circuit's instant order, the District of Nevada determined that the Copyright Act does not permit a plaintiff to seize a domain name used by an alleged infringer to post infringing content on the internet (76 PTD, 4/20/11).

Defendants Start Raising Fair Use Arguments

A website that tracked the Righthaven litigation, www.righthavenlawsuits.com, estimated that the company netted over $300,000 through settlements. However, the tide soon began to turn against Righthaven as a number of defendants began fighting the lawsuits in court, often receiving pro bono representation from organizations like the Electronic Frontier Foundation.

The first breakthrough for the defendants came in Righthaven L.L.C. v. Realty One Group Inc., 96 U.S.P.Q.2d 1516 (D. Nev. 2010), where the District of Nevada determined that a defendant's reproduction of “only the first eight sentences of a thirty sentence news article” constituted fair use under Section 107 of the Copyright Act, 17 U.S.C. §107. The same court in April 2011 deemed another defendant's re-posting of an entire paragraph article to be a fair use within the meaning of the Copyright Act. Righthaven L.L.C. v. Center for Intercultural Organizing, No. 10-1322, (D. Nev. 2011).

Transfer Agreement Revealed

The biggest breakthrough for the defendants, however, came in Righthaven L.L.C. v. Democratic Underground L.L.C., 791 F.Supp.2d 968, 99 U.S.P.Q.2d 1095 (D. Nev. 2011) (117 PTD, 6/17/11). In that case, the defendant was able to gain access to the transfer agreement between Stephens Media and Righthaven. The relevant part of the agreement states:

Despite any such Copyright Assignment, Stephens Media shall retain (and is hereby granted by Righthaven) an exclusive license to Exploit the Stephens Media Assigned Copyrights for any lawful purpose whatsoever and Righthaven shall have no right or license to Exploit or participate in the receipt of royalties from the Exploitation of the Stephens Media Assigned Copyrights other than the right to proceeds in association with a Recovery.

The court pointed out that the exclusive rights of copyright ownership, as articulated in Section 106, do not include the right to sue. Accordingly, Democratic Undergroundsaid that “the assignment of a bare right to sue is ineffectual because it is not one of the exclusive rights.” It thus held that Righthaven lacked standing to sue for copyright infringement, and it accordingly dismissed the case.

Other courts quickly followed suit, and Righthaven saw complaints dismissed for lack of standing in both of the two cases subject to the Ninth Circuit's instant decision, and in many more. Hoehnalso found that a subsequent amendment intended to clarify the SAA provided Righthaven “with only an illusory right to exploit or profit from the work,” which the court said is not enough to grant the company standing to sue for infringement.

Moreover, Hoehn found in the alternative that even if Righthaven had standing, Hoehn's posting of an entire article to the comment section of a website constituted fair use(142 PTD, 7/25/11). That holding sparked unease in the content industry, and in an amici curiae brief the Association of American Publishers and the Recording Industry Association of America urged the Ninth Circuit to overturn that part of the district court's decision.

Righthaven appealed a number of the adverse rulings to the Ninth Circuit. However, all appeals other than Hoehnand DiBiase were dismissed for Righthaven's failure, in the other cases, to file an opening brief. Meanwhile, a class action lawsuit has been filed against Righthaven (101 PTD, 5/25/11); the company declared for bankruptcy; and it was ordered to assign all of its intellectual property and other intangible property to a receiver for auction to partially satisfy a judgment for attorneys' fees and costs that was assessed against it in Hoehn(244 PTD, 12/20/11).

Ninth Circuit Says SAA Ineffective

The Ninth Circuit agreed both that Silverswas controlling, and that the SAA was defective as a tool for transferring any exclusive rights. Judge Richard R. Clifton said:

The SAA provided that Stephens Media automatically received an exclusive license in any copyrighted work it assigned to Righthaven, so that Stephens Media retained “the unfettered and exclusive ability” to exploit the copyrights. Righthaven, on the other hand, had “no right or license” to exploit the work or participate in any royalties associated with the exploitation of the work. The contracts left Righthaven without any ability to reproduce the works, distribute them, or exploit any other exclusive right under the Copyright Act. See 17 U.S.C. § 106. Without any of those rights, Righthaven was left only with the bare right to sue, which is insufficient for standing under the Copyright Act and Silvers.

The appeals court also agreed with the district court in Hoehn that even the amended SAA failed to grant Righthaven any exclusive rights that would give it standing to sue for copyright infringement. Even under the amendment, “Righthaven was still unable to exploit any exclusive rights unless Stephens Media permitted it to,” the court said. “A hypothetical possibility that Righthaven might be able to exercise exclusive rights if Stephens Media decided to allow it at the time is not sufficient for standing.”

Marc J. Randazza of Randazza Legal Group, San Diego, represented Hoehn both at the district court and at the Ninth Circuit. On May 10, he told BNA that the Ninth Circuit sent the clear message “[t]hat copyright law exists to reward authors and to protect the creative process, not to reward opportunists who seek to create a futures market in litigation.”

EFF represented DiBiase and expressed a similar sentiment. On its blog, EFF said “[T]oday's decision effectively ends one pernicious species by establishing that copyright owners cannot sell the right to sue to attorneys looking to make a quick buck off the back of bloggers, while otherwise doing business as usual.”

Fair Use Decision Vacated

The appeals court said that it need not, and in fact cannot, reach the fair use ruling from Hoehn.

“The Supreme Court has rejected the 'doctrine of hypothetical jurisdiction,' in which a federal court assumes jurisdiction for the purpose of reaching the merits, as the practice 'carries the courts beyond the bounds of authorized judicial action,' ” the court said, quotingSteel Co. v. Citizens for a Better Environment, 523 U.S. 83, 94 (1998).

The court was not critical of the fair use determination in Hoehn. Indeed, “By providing an alternative basis for decision, the court sought to deal with this case in a more efficient manner,” the appeals court said. “If we disagreed with the district court and concluded that Righthaven had standing to bring this copyright infringement action, we could have proceeded directly to the next issue, fair use, without requiring a remand and a further appeal.”

Still, “because we agree that Righthaven did not have standing, it is not appropriate for us to go further or for the district court's alternative ruling to stand,” the court said. It thus vacated the fair use ruling.

Randazza said he was “disappointed” that the fair use ruling was not upheld.

“I think there are not enough fair use cases, and the Ninth Circuit had a chance to articulate some good standards--even if they had taken the opportunity to reverse the fair use holding,” he said. “The fact that they simply vacated it though, makes it not really matter. The lower court's reasoning was not overturned, and thus it still stands to show you that even a whole article can be fairly used, in the right circumstances.”

Judges Diarmuid F. O'Scannlain and Stephen S. Trott joined the court's opinion. DiBiase was represented by the EFF's Corynne McSherry, San Francisco. Righthaven was represented by Erik Syverson of Miller Barondess, Los Angeles. The RIAA and the AAP were represented by Steven J. Metalitz of Mitchell Silberberg & Knupp, Washington, D.C.

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